The Basics of a Sole Proprietorship

Jose Valdez
filed under "Internet-and-Businesses-Online"

A sole proprietorship is the easiest and least expensive form of business structure to set up. Most businesses start out as sole proprietorships and some move on to a more sophisticated for of business structure. A sole proprietorship is owned by one individual. The business and the individual are seen as one and the same in the eyes of the law. This means that the sole proprietor owns all assets and profits that are generated by the business. This also means that he or she is completely responsible for all of the business's debts and responsibilities. A sole proprietorship can do business under the name of the owner or it can do business using a fictitious name, such as Jay's Car Repair. This is also called "doing business as", and does not create a legal entity that is separate from the business owner. A sole proprietor typically signs contracts or checks using his or her name and will also typically have checks that are made out to the business written in his or her name, even though the business may be operating under a fictitious name. The reason for this is that the business and the owner are one and the same in the eyes of the law. Many sole proprietorships combine personal and business transactions, such as using the same checking account for both. Sole proprietorships can sue and be sued in the name of the sole proprietor. Advantages of a Sole Proprietorship Sole proprietorships are the easiest and least expensive form of business to set up and maintain The sole proprietor owns all assets and profits that are generated by the business Profits from the business are reported on the sole proprietor's personal tax return A sole proprietorship is easy to dissolve is desired Dis-Advantages of a Sole Proprietorship A sole proprietor is completely responsible for all of the business's debts and responsibilities. Both personal and business assets are at risk A sole proprietor may have a more difficult time raising fund Hiring and retaining higher quality employees can be more difficult Some employee benefits are not directly deductible from business income this article is free to reprint if the following text and link are included: www.A Guide to Starting a Business.com About the author: article source:for a guide to starting a business visit www.aguidetostartingabusiness.com